Modvat credit on telephone cable allowed where capital goods were used in the factory, without direct manufacture use requirement.

Telephone cable falling under Heading 85.44 qualified as capital goods for Modvat credit under Rule 57Q when used in the factory of the manufacturer of final products. The provision, as applied during the relevant period, required use in the factory and did not impose an additional condition that the goods themselves be used directly in the manufacture of final products. On that basis, the department's objection based on absence of direct manufacturing use was rejected, and credit was held admissible.

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Issues: Whether telephone cable falling under Heading 85.44 and used within the factory was eligible for Modvat credit under Rule 57Q when it was not used directly in the manufacture of final products.

Analysis: Rule 57Q, as applicable during the material period, allowed credit on capital goods specified in the relevant tariff entries if such goods were used in the factory of the manufacturer of final products. The provision did not add any requirement that the capital goods must themselves be used in the manufacture of the final products. Since the telephone cable fell within the specified tariff entry and was used in the factory, the department's objection based on absence of manufacturing use could not be accepted.

Conclusion: The telephone cable was eligible for Modvat credit under Rule 57Q, and the assessee was entitled to the credit.

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